The government recently reported that January job losses topped 17,000 – the first monthly decline since August, 2003. The report was widely cited, but the figure is insignificant, representing only about .001 percent of U.S. jobs. Of greater importance is chronic unemployment, which Congress calls the most useful indication of recession. As of Jan. 2008, 18.3 percent of jobless workers had been out of work for six months or more, compared to 16.2 percent the previous year. Persistent joblessness is higher now than in March of 2002, when Congress first extended unemployment benefits to address the problem. In the last four decades, wages have also declined. In 1960, a working man could support a family. By 1980, he had to ask his wife to work to achieve that goal. During the last seven years under Bush, household debt has doubled, and manufacturing jobs have fallen below 1945 levels. The national debt has risen 300 percent. According to Paul Craig Roberts, former Assistant Secretary of the Treasury for Economic Policy, this is the profile of a third world economy. Recent scandals and failures (Countrywide Bank, the Carlyle Group, Bear Stearns and possibly Lehman Bros.) tied to subprime mortgages and poor fiscal management point to an economy on the brink of total meltdown.

As we enter the next Great Depression, various writers have begun to assign blame. One cites free trade, beloved of economists but the bane of American workers. Economists (using Joseph Schumpeter's theory) view free trade as a leveler, removing unproductive jobs in backward industries and replacing them with better paying alternatives. Economists don't work in customer service, manufacturing or IT, which have jointly lost 2.3 million jobs since 2001 (McKinsey Consulting). This trend is accelerating, and economist Alan Blinder estimates that eventually as many as 30 percent of jobs may be outsourced to India and other cheap-labor countries. Even economists are beginning to realize that the gains from free trade go to those at the top of the economic food chain, and the "trickle-down effect" (or Reaganomics) seldom reaches workers at the bottom. The upside of this gloomy economic picture is that companies are running lean. Unfortunately, this is also the downside; there is no place for the unemployed to go.

Market forces, and the balance of trade, determine the value of the dollar. I will cite from a 2003 report by the Peterson Institute: "Two complementary steps are needed to complete the essential correction of the dollar…First, the trade-weighted average exchange rate of the dollar needs to fall by another 10-15 percent to restore a sustainable external position for the United States. Second, this upcoming "second wave" of decline should occur against a broader group of currencies and with greater corresponding appreciations in East Asia ( i.e., not against the Euro)".

According to the Federal Reserve Bank, a strong dollar creates lower prices on foreign goods, but also makes it harder for U.S. firms to compete in foreign markets (or for foreigners to invest in U.S. firms). A weak dollar makes it easier for U.S. firms to sell abroad and invites foreign investing. Unfortunately, consumers face higher prices because foreign goods become more expensive. If the Peterson Institute protocol is achieved, economically stressed American consumers will be put further in the hole by greatly inflated energy and food prices, and the even more recently announced 12-percent inflation rate in China, which ups the cost of Chinese goods.

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Between 2000 and 2007, the dollar lost 30 percent of its purchasing power. Some fringe economists have accused the Federal Reserve of operating the U.S. like a banana republic, running up huge overseas debt, selling capital assets to foreign interests and printing money by the truckload. One commentator calls the dollar a "Bernanke peso", another accuses the U.S. of subscribing to "Zimbabwe economic theory". China has about $120 billion in U.S. debt, and Latin American countries have begun selling off their dollar reserves after years of bolstering our economy.

The system of Federal Reserve Banks, or the Fed, is not a government agency. It is a fiscal management organization (some call it a cartel of bankers) mandated by Congress in 1914. At its inception, J. P. Morgan Co. and Kuhn, Loeb & Co., reportedly bought stock in the Fed on behalf of the Rothschild's and the Bank of England, and had their principal officers appointed to the Fed in various advisory capacities. The trend has persisted. Goldman Sachs entered the Fed arena later (former Goldman employees currently head the New York Stock Exchange, the World Bank, the U.S. Treasury Department and Treasury in the person of Treasury Secretary Henry M. Paulson Jr.). One observer credits Goldman (acting in concert with the Fed) with repeal of the Public Utility Holding Company Act (PUHCA) in 2005, saying Goldman's current energy windfall profits are a result. Kevin Warsh, a current chairman of the Fed, was once director of mergers and acquisitions at J. P. Morgan (Greenspan worked there, too). Donald Kohn, vice-chairman, is also current chair of the Committee on the Global Financial System (GFS), an international money and banking system whose key players include the International Monetary Fund (IMF) and the Bank for International Settlements (BIS, of which ex-chairman Greenspan was also chair from 1994 to the end of his Fed term). The BIS is comprised of financial institutions acting in the global arena. Hedge funds are part of this global operation, and have recently experienced a trading surge, sparking rumors that the Fed is short-selling. Three of the five Fed members have served as Bush advisors. Conspiracy theories are bound to propagate when the rich and powerful also hold the purse strings of the American economy.

Federal Reserve banks are privately owned corporations (Lewis vs. US, case #80-5905, 9th Circuit, June 24, 1982). As such, they are not required by the Securities and Exchange Commission to publish a list of major shareholders. Federal Reserve notes are not backed by gold, but by the assets of the Federal Reserve, namely the power of Congress to tax people. Gold represents a meager one-tenth of Fed notes. The 1914 act effectively transferred the power to coin and issue money from the government to the Federal Reserve. No Federal Reserve Bank has ever been audited. The banks are reportedly owned by: the Rothschild Bank of London; the Warburg Bank of Hamburg; the Rothschild Bank of Berlin; Lehman Brothers of New York; Lazard Brothers of Paris; the Kuhn Loeb Bank of New York; the Israel Moses Seif Banks of Italy; Goldman, Sachs of New York; Warburg Bank of Amsterdam; and the Chase Manhattan Bank of New York. In 1992, taxpayers paid the Fed banking system $286 billion in interest on national debt created by Fed policies; debt which the Fed purchased by printing money. Forty percent of all income tax goes to pay this interest, but the actual debt that can never be repaid. In fact, the Fed is rather like a high-interest credit card, and America has been behind on its payments almost since inception.

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The First Great Depression was also a series of events put in motion by the Federal Reserve. In 1925, according to Ron Chernow's book, "The House of Morgan", Ben Strong, then chairman of the Fed, made a secret commitment to the governor of the Bank of England to help England reinstate the Gold Standard. With moral support from the U.S. Treasury, Strong raised the value of the British pound by depressing U.S. interest rates. The economy, already strong, soared. With investment margins at 10 percent, investors began borrowing heavily to invest in the stock market.

Strong died in Oct. 1928. His successor, George.Harrison, raised rates to cool the fever, but too late. Almost one year later, on October 28, 1929 the Dow fell 20 percent. It continued to fall, bottoming out 40 percent below its peak in two months. The Fed dumped money into the system, creating temporary recovery, but the Dow finally hit bottom at 41.22 on July 8, 1932, 10 percent of its peak three years earlier. In what the Feds called their "austerity" program, banks were not given more money, and between 1930 and 1933 a cascade failure ensued. The money supply fell 27% from 1929 to 1933. In that same period, tax revenues also fell, leaving a 900-million gap in the budget. The Revenue Act of 1932 was expected to raise $1.1 billion in new revenue from steeper income tax rates and lower exemptions, and it did, on the backs of impoverished Americans.

As soon as banks start failing again, the Fed will further consolidate its position as the only game in town by stepping back and again demanding austerity. The Fed is, traditionally, a lender of last resort. This means that when a bank is in trouble and cannot meet its depositors’ demands for cash, the Federal Reserve must provide the liquidity by buying the loans (or bonds from the banks' investment portfolio). The Federal Reserve was derelict in this responsibility during the banking crises that culminated in the Great Depression, and it will be derelict again, because consolidating power in the hands of the few is the real international monetary policy.

Ron Paul, the most vocal opponent of the Fed, says "The Fed has followed a consistent policy of flooding the economy with easy money, leading to a misallocation of resources and an artificial "boom" followed by a recession or depression when the Fed-created bubble bursts".

We don't need conspiracy theories (i.e., the Fed is short-selling the market, is involved with Enron and the Carlyle Group to bring America to its knees, bribed Democrats in S. Florida to stop a ballot count in the last election, etc.). We have the facts, and the Fed is a failure. Considering its international alliances, no one should be surprised. As Thomas Jefferson, founding father of our country, pointed out: "A merchant has no country."

If you think the Fed can, or will, act to save the American economy, read the New York Times article. Also consider the fact that the Fed has traditionally used financial failures to consolidate its shadow position as controller of the American economy. No doubt it is licking its proverbial lips as first one, and then many, financial institutions slide down the slippery slope to the North American Union, the Amero, and the New World Order.

I'm a freelance writer, a former reporter, the mother of four amazingly compassionate and intelligent human beings but otherwise poor as the proverbial church mouse. I write about the important stuff: environment, corporate fraud, government (more...)